(Alliance News) - Fashion and homewares retailer Next on Thursday reported a strong Online performance in its half-year results, but sales in its bricks-and-mortar Retail unit continued to slide.
Overall sales for the six months to July 2 rose 3.7% to GBP2.06 billion, with Online sales up 13% to GBP1.00 billion and Retail sales falling 5.5% to GBP874.3 million.
Next's pretax profit was up 4.0% to GBP327.4 million, and on an underlying basis, pretax profit was up 2.7% to GBP319.6 million. The company raised its interim dividend by 4.5% to 57.5 pence each.
Next reaffirmed guidance given in July for 0.3% year-on-year pretax profit growth, with earnings per share set to rise 5.2% due to ongoing share buybacks.
"At this time, it is impossible to predict whether the UK will leave the EU with or without a deal and equally difficult to predict the effect no-deal might have on the wider UK economy," the company said in its outlook.
"So, our guidance comes with one important caveat: we have not accounted for the possible positive effects of a deal or possible negative effects of a no-deal Brexit. The guidance given...does not account for any of the many outcomes that may materialise."
Here is what you need to know at the London market open:
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MARKETS
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FTSE 100: called down 18.15 points, 0.2%, at 7,295.90
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Hang Seng: down 1.3% at 26,407.15
Nikkei 225: closed up 0.4% at 22,044.45
DJIA: closed up 36.28 points, 0.1%, at 27,147.08
S&P 500: closed flat at 3,006.73
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GBP: down at USD1.2469 (USD1.2476)
EUR: down at USD1.1046 (USD1.1057)
Gold: down at USD1,496.64 per ounce (USD1,507.01)
Oil (Brent): down at USD63.70 a barrel (USD64.16)
(changes since previous London equities close)
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ECONOMICS AND GENERAL
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Thursday's Key Economic Events still to come
0930 BST UK retail sales
1200 BST UK Bank of England interest rate decision and meeting minutes
1000 CEST EU euro area balance of payments
0830 EDT US unemployment insurance weekly claims report - initial jobless claims
0945 EDT US Bloomberg Consumer Comfort Index
1000 EDT US existing home sales
1000 EDT US leading indicators
1030 EDT US EIA weekly Natural Gas Storage Report
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The US central bank cut its benchmark interest rate for the second time this year on Wednesday, and Federal Reserve Chair Jerome Powell vowed to do whatever is needed to keep the economy growing. But the Fed's policy committee is divided, with three of 10 voting members dissenting from the decision, one because he wanted even more stimulus. Powell said policymakers do not expect a recession, but trade uncertainty is creating "cross winds" that are weighing on the economy amid US President Donald Trump's conflict with China. Although consumer spending remains strong, "trade uncertainty is having an effect. You see it in weak business investment, weak exports," Powell told reporters, stressing the Fed will "will act as appropriate to sustain the expansion." The Fed's policy-setting Federal Open Market Committee lowered the policy interest rate by 25 basis points to a target range of 1.75 to 2.0%, as expected. With that second rate cut, it has now pulled back on half of the four interest rate increases it implemented in 2018.
Trump wasted no time in slamming the Fed on Twitter. "Jay Powell and the Federal Reserve Fail Again. No 'guts,' no sense, no vision! A terrible communicator!"
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For a third straight day, the Federal Reserve Bank of New York on Thursday will inject billions into US money markets to preserve the Federal Reserve's control over short-term interest rates. In a statement late Wednesday, the New York Fed said it will again conduct a repurchase agreement operation of up to USD75 billion to offer more liquidity to the system. It offered the same amount in repo operations Tuesday and Wednesday. Banks have struggled in recent days to find the cash needed to meet reserve requirements which has pushed up short-term borrowing rates.
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The Bank of Japan decided to maintain its ultra-easing monetary policy despite other central banks cutting interest rates to prop up growth. "Japan's economy has been on a moderate expanding trend, with a virtuous cycle from income to spending operating, although exports, production, and business sentiment have been affected by the slowdown in overseas economies," the central bank said in a statement issued after a two-day monetary policy meeting. At the previous meeting in July, the bank vowed to take more easing measures if downside risks to economic activity and prices are significant especially due to overseas developments.
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The UK's highest court is set to hear from a host of supporters of a legal challenge over the controversial prorogation of Parliament – including former prime minister John Major. Lawyers for businesswoman and campaigner Gina Miller argue Prime Minister Boris Johnson's advice to the Queen to suspend Parliament for five weeks was "an unlawful abuse of power". On Thursday, the third and final day of a historic hearing at the Supreme Court in London, a panel of 11 justices will hear submissions on behalf of Major, the Welsh and Scottish governments and Northern Irish victims' campaigner Raymond McCord.
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European Commission President Jean-Claude Juncker said he had "no emotional attachment" to the Brexit backstop but had told Johnson he was committed to its objectives. The issue of the backstop - a part of Britain's current EU divorce deal - was at the centre of a first meeting between Johnson and Juncker in Luxembourg on Monday. "The risk of a no-deal remains very real," Juncker told EU lawmakers on Wednesday, adding that Brussels would try hard to avoid this scenario. "I am not sure that we will succeed. There is very little time left. But I am certain that we have to try," he said.
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US Secretary of State Mike Pompeo said that attacks on Saudi oil facilities at the weekend were an Iranian "act of war" and called the Houthi rebels' claim of responsibility "fradulent". "We were blessed that there were no Americans killed in this attack, but any time you have an act of war of this nature, there's always risk that that could happen," he said before arriving in Saudi Arabia. Pompeo added that the US intelligence community has "high confidence" the Houthis do not possess the weapons used in the attack. Saudi Arabia is leading an alliance of Arab nations fighting against Houthi rebels in Yemen, who are supported by Iran.
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US President Trump named his pointman for hostage situations, Robert O'Brien, to replace his hawkish national security advisor sacked just as relations with Iran are entering a new crisis point. Trump made the announcement by Twitter and later appeared with O'Brien in front of reporters while travelling in California, where he said his new foreign policy aide was "highly respected." Last week, Trump abruptly fired John Bolton, a vigorous proponent of using US military force abroad and one of the main hawks in the administration on Iran.
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BROKER RATING CHANGES
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RBC CUTS FERGUSON TO 'UNDERPERFORM' ('SECTOR PERFORM') - TARGET 5100 (5200) PENCE
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JEFFERIES RAISES CENTRICA TO 'BUY' ('HOLD') - TARGET 90 PENCE
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JEFFERIES CUTS UNITED UTILITIES TO 'UNDERPERFORM' ('HOLD') - TARGET 660 (870) PENCE
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JEFFERIES CUTS SEVERN TRENT TO 'HOLD' ('BUY') - TARGET 1920 (2340) PENCE
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COMPANIES - FTSE 100
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Drinks giant Diageo said its year ending June 2020 has begun well, with organic net sales growth guided at the mid-point of its 4% to 6% range. Organic operating profit is set to be one percentage point ahead of organic sales growth. However, due to a strong comparable a year prior, Diageo sees first half organic operating profit growth to either match, or be slightly slower than, organic net sales growth. Diageo also said it is not immune to changes to global trade policy.
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Chemicals firm Johnson Matthey guided over the "medium term" for mid-to-high single-digit compound annual growth in earnings per share, as well as expanding its return on invested capital to 20%. It also hopes to continue boosting payouts. Clean Air will deliver mid-single-digit growth up to 2025, Johnson Matthey said, with Efficient Natural Resources expected to deliver similar growth in the same period. Johnson Matthey is making good progress in the Health unit, it continued, while "strong" performance has been registered in the New Markets segment, especially in Battery Materials. Johnson Matthey has kept its outlook for its year ending March 2020 unchanged.
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The UK Competition & Markets Authority has stepped up its investigation into JD Sports Fashion's takeover of Footyaslum. It has asked for remedies from the sports retailer, the CMA said in its own statement, while JD Sports said it will work with the CMA to avoid a phase two investigation into competition concerns.
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COMPANIES - FTSE 250
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IG Group reported flat revenue for the three months to August 31, its first quarter, at GBP129.1 million. Stock trading & investment revenue was up 9%, the core OTC leveraged flat, and exchange trade derivatives down 2%. IG also said the search for a new chair is "at an advanced stage", with the preferred candidate now identified. IG is now securing the relevant regulatory approvals. The company is looking to appoint new non-executive directors, as well, and it announced the hiring of Andrew Didham in that role, who will join immediately.
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Controls systems firm Spectris has agreed to sell BTG Group to Germany's Voith for EUR319 million. BTG is part of Spectris' Industrial Solutions segment, providing specialising measuring instruments, software, and services. The sale, Spectris said, is in line with the company's portfolio simplification plans.
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COMPANIES - INTERNATIONAL
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California Governor Gavin Newsom signed legislation which could slam the brakes on the so-called "gig economy" by requiring rideshare firms to treat contract drivers as employees, challenging the economic models of giants such as Uber Technologies and Lyft. The legislation, which is being closely watched in other states, responds to critics who argue that rideshare firms shortchange contract drivers by denying them employee benefits. The governor called the measure known as AB5 "landmark legislation for workers and our economy" and said it would reduce "worker misclassification" that denied benefits such as minimum wage, sick leave and health insurance. Uber and Lyft, whose business models may be jeopardized by the law, said they would press on for a referendum that would overturn the measure, asking voters to approve a new system for independent workers with benefits.
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Toyota Motor said its Brazilian subsidiary intends to invest BRL1 billion, about USD243.2 million, in its Sorocaba plant in Sao Paulo, Brazil. The plant - which opened in 2012 and currently produces the Etios and Yaris models - will be manufacturing a new model for the Brazilian market from 2021, Toyota said. The Japanese car maker said it plans to hire 300 new employees to start production of this vehicle, the model of which was not disclosed.
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Microsoft declared a quarterly dividend and announced a new share buyback programme for up to USD40 billion. The new share repurchase programme, which has no expiration date, may be terminated at any time, Microsoft noted. The company did not provide any further details regarding the buybacks. Microsoft lifted its quarterly payout by 11% to USD0.51 per share.
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Thursday's Shareholder Meetings
Peel Hotels (re cancelling of shares on AIM)
Diageo
IG Group Holdings
United Carpets
ECO Animal Health Group
Gateley Holdings
Auto Trader Group
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Centrica (CNA)
Ferguson (FERG)
Next (NXT)
Severn Trent (SVT)
United Utilities (UU.)
